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Sudan’s late budget announcement is shrouded in mystery

December 24, 2019 at 11:45 am

Sudanese Prime Minister Abdalla Hamdok holds a press conference at Khartoum International Airport in Khartoum, Sudan on December 08, 2019 [Mahmoud Hjaj/Anadolu Agency]

Four months into the rule of Sudan’s transitional government and the cracks are beginning to appear. The 2020 budget has yet to be revealed because of major differences emerging between factions within the Freedom and Change movement. The issue centres on the removal of subsidies on bread and fuel, which is set to cause prices to rise sharply but aims to drive down inflation in the medium and long term.

Sources close to the negotiations here in Sudan say that the Communist and Baathist elements of the ruling coalition are refusing to push through the changes recommended by the International Monetary Fund (IMF). In a recent visit to Washington, Sudan’s Finance Minister, Dr Ibrahim Ahmed El-Badawi, is alleged to have agreed with the IMF and World Bank to restructure the economy substantially. Critics of his decision to lift the subsidies say that the Minister had no authority to give such agreement. Promises of that nature, as well as others, made by Prime Minister Abdullah Hamdok to the European Union mean that unless Sudan introduces the agreed proposed changes, pledges of international support to assist its ailing economy are unlikely to materialise.

The idea is that the subsidies — which benefit everyone, including those who are better off — will be replaced by direct support to the poor in the form of cash payments. Two years ago, the same proposal was suggested to the Bashir government, and while some subsidies were removed the then President stopped short of making financial pay-outs. Removing subsidies would prevent unscrupulous traders selling cheap flour on the black market and pocketing the difference.

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Experts argue that financial support for poor families would be cheaper than subsidies for the whole population given that most poor families live in rural areas using alternatives to bread and others still use horses and carts for transport and travel. Commentators expect the delay in the budget to be resolved by the end of the year, but that it could lead to a permanent split in the ranks of the civilian government or isolation from international donors if the subsidies are not removed.

Clearly, the new Prime Minister is facing an uphill struggle to solve the economic problems he inherited. Journalist Mekki Al-Magrobi believes that he was overconfident: “In the beginning, he talked about a ‘honeymoon’ period with donors and expected the Europeans like France and the UK to provide support. He ignored the Kingdom of Saudi Arabia and the Emirates but was forced to go back cap in hand. Now, it strikes me as unfair to blame the Sudanese for being over-optimistic. He can’t have it both ways.”

Just where the funds for the 2020 budget will come from and how they will be shared remains a hotly disputed issue. A pledge by the Deputy President, Mohammed Dagalu, to hand over gold mines in Jebel Amer to the government appears to be one source of revenue. Another source of income relies on the ability of the transitional government to recover stolen funds illegally taken out of the country by the previous regime. Wild estimates put the total embezzled by the former regime at $64 billion, a figure that has never been substantiated and has created too much optimism that Sudan can get it all back.

“I would put the estimate of funds smuggled outside the country at less than one billion dollars,” said one source with knowledge of the issue. “Al-Bashir was aware that money was being syphoned out illegally but some of the money was taken by individuals to circumvent sanctions; of course, a large percentage was stolen.”

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The new government has staked its promises on the notion that spending on the military and security services if re-directed to education and heath would improve the basic cost of living and opportunities for the average citizen. They hope to make education and health the main focuses but currently they remain the responsibility of Sudan’s states rather than the federal government. Their budgets are not reflected in the federal expenditure that covers infrastructural projects. Education appears as a mere 7 per cent and health as 2 per cent of federal spending. Convincing the army members of the Sovereign Council to reduce the military budget may still prove a major sticking point, making it unlikely that the current share of 70 per cent will fall. This would be politically unpopular for the civilian transitional government.

Discussions over the budget late last night suggest that bread subsidies might remain, but fuel subsidies may well be removed. Critics of the “clandestine” nature of the budget proposals have likened the leaks about them to the lack of transparency often levelled at the previous regime. Mahmoud Abdul-Jabbar, a leading figure in the National Front for Change, a group outside the Freedom and Change movement, believes that the present government has run itself into a corner. “The Freedom and Change movement cannot argue that Al-Bashir ran a centralised system and ignored the states, when we hear in leaked reports that they are trying to remove state taxes and return the funds to the centre,” he explained.

With just a few days before the end of the year, the final 2020 budget proposal is still shrouded in mystery and has many hurdles to clear, not least the matching of the proposed spending to the aspirations of those expecting democratic change. In the absence of a transparent process to set the budget, managing expectations is continuing to be one of the transitional government’s biggest challenges.

The views expressed in this article belong to the author and do not necessarily reflect the editorial policy of Middle East Monitor.